TAKEStock: The Egyptian Milling Industry
Our top stock picks in this high-dividend-yield industry
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The Egyptian Milling Industry
Set on 1 November 2021
Impact POSITIVE / Degree Moderate
Egypt’s milling industry is one of the few industries that include high dividend plays, along with the pharmaceutical industry. The fact that the seven milling stocks listed on the EGX are all state-owned mills means that it is dividend season. State-owned mills end their fiscal year in June with annual cash dividends usually paid in November/December. This is one reason we think milling stocks should perform well over the coming period. Another reason, dividends aside, is that four of these seven names are worth owning on a valuation basis, specifically for income investors. Our top picks are Middle & West Delta Flour Mills [WCDF] (PT EGP170.8/share, +65%), East Delta Flour Mills [EDFM] (PT EGP131.4/ share, +54%), Upper Egypt Flour Mills [UEFM] (PT EGP131.4/share, +29%), and Central Egypt Flour Mills [CEFM] (PT EGP42.7/share, +28%). While POSITIVE, we see the dividend story a MODERATE impact due to the low trading liquidity of all milling stocks.
The competition state-owned mills have long been facing has stiffened lately since private-sector mills producing 82%-extraction flour started to enter the market. Slashing the flour allocation to state-owned mills in major governorates and reducing their capacity utilization rates, this competition proved cutthroat. Private-sector mills have switched to the production of 82%-extraction flour only after it became more profitable than 72%-extraction flour in the new status quo which will be explained later in this note.
Amr Abdelrazek
Equity Analyst
T +202 3300 5718